updated 04:40 pm EST, Mon December 19, 2011

ATT ends troubled T-Mobile takeover attempt

AT&T on Monday said it planned to drop its attempt to buy T-Mobile. Citing opposition from the Department of Justice and the Federal Communications Commission, it decided to enter a "mutually beneficial" roaming deal with T-Mobile to share each other's capacity. AT&T would pay its promised $4 billion in combined breakup fees to T-Mobile in response to the failed deal.

The company still stressed that it felt there was a spectrum crunch that had to be taken on as soon as possible. It complained that the $39 billion deal wasn't going through and claimed that it was an "interim solution" that needed to be done before "customers will be harmed and needed investment will be stifled." AT&T didn't try to explain how the permanent elimination of a fourth major national carrier would be considered a stopgap.

Without the prospect of a deal, it instead asked the FCC to approve its acquisition of Qualcomm's 700MHz space to boost its LTE network. Laws should also be in place to help address "longer-term" needs, AT&T asked.

The end came after AT&T realized it would face a likely insurmountable barrier to the deal. FCC officials slated a mandatory hearing should the DOJ lawsuit clear AT&T with strong signs that it had no intentions of approving the merger. After AT&T withdrew its application, the FCC published details of its investigation that painted an unflattering picture of the merger and which AT&T might have wanted to keep secret. The carrier and T-Mobile moved to stay the trial just last week in what many took as a sign that AT&T thought it either needed major asset sell-offs to clinch the deal or to quit altogether.

Leaks of stalled asset sale talks on Sunday gave clues that AT&T hadn't had any success persuading smaller carriers to buy T-Mobile assets. Reportedly, they didn't believe the deal would clear regardless and might have thought that the industry would suffer regardless.

While T-Mobile is hurting financially and may suffer now that its customers might not get the iPhone or other key devices until at least 2012, the move is likely to be considered a relief for Sprint as well as for every carrier smaller than T-Mobile. The smaller networks have pointed out that a post-merger AT&T and Verizon would have had 80 percent of cellphone subscribers, making it difficult for them to get the phones they want and possibly squeezing them on deals for roaming or for infrastructure.

Along with attempts to muster hundreds of questionable endorsements from organizations that had almost always taken AT&T contributions, the deal raised concerns at the FCC after AT&T revealed an estimate of its own from January where it only needed $3.8 billion to reach its 97 percent LTE coverage targets, not a takeover. The merger would potentially have had extra capacity benefits, but questions have existed as to why AT&T didn't either aim for a roaming deal first or buy unused cable company spectrum instead.

Spectrum crunch

The spectrum crunch exist because cellular companies aren't shrinking their cells like the original scheme envisioned. We need lower towers in valleys rather than tall ones on hilltops. That'd allow more channel reuse. And interestingly, it'd mean that scarce 700 MHz spectrum would become less pricey. When you're trying to shrink cell size, the less building penetration of the higher frequencies is better.

Cellular companies could also be more imaginative. Much of the demand that is for data that is commonly needed should be broadcast via digital TV channels rather than sent to each individual phone separately. Sporting events in video, periodicals, OS and even popular app upgrades could be handled that way. All that's needed are smartphones smart enough to monitor and store the broadcasts that are for them.

I fear, however, that this won't happen until the execs at cellular companies are forced to realize that there's no new spectrum to grab. They'll adopt late out of necessity what they should be adopting now because it's sensible.